The table given below lists the average price level in a country for four consecutive years.
Table 7.2
$\begin{array}{c}
\text { Price Data }\
\begin{array}{|c|c|}
\hline \text { Year } & \text { Average Price Level } \
\hline 1992 & 1.000 \
1993 & 1.039 \
1994 & 1.064 \
1995 & 1.093 \
\hline
\end{array}
\end{array}$
-Refer to Table 7.2. What was the purchasing power of the dollar in 1995 relative to the base year 1992?
A) 0.54
B) 0.72
C) 0.91
D) 0.97
E) 1.93

Question

The table given below lists the average price level in a country for four consecutive years.
Table 7.2
 $\begin{array}{c}
\text { Price Data }\
\begin{array}{|c|c|}
\hline \text { Year } & \text { Average Price Level } \
\hline 1992 & 1.000 \
1993 & 1.039 \
1994 & 1.064 \
1995 & 1.093 \
\hline
\end{array}
\end{array}$
-Refer to Table 7.2. What was the purchasing power of the dollar in 1995 relative to the base year 1992?
A) 0.54
B) 0.72
C) 0.91
D) 0.97
E) 1.93

Quizplus · Accepted Answer

To calculate the purchasing power of the dollar in 1995 relative to the base year 1992, we need to use the formula:

Purchasing power = 1 / Price index

where Price index = (Average price level in the given year / Average price level in the base year) x 100

So, for 1995:

Price index = (1.093 / 1.000) x 100 = 109.3

Therefore, the purchasing power of the dollar in 1995 relative to the base year 1992 is:

Purchasing power = 1 / 109.3 = 0.91

This means that the dollar had only 0.91 of its purchasing power in 1995 compared to what it had in 1992. Therefore, the correct answer is choice C.

The Table Given Below Lists the Average Price Level in a Country